The landscape of the global semiconductor market is currently rife with uncertainty, particularly when it comes to the prices of storage chips such as DRAM and NAND flashCompanies operating in the technology and electronics platforms are feeling the pinch as prices fluctuate dramatically, resulting in operational pressures that may reshape their strategies in the forthcoming monthsTrendForce's recent report on the memory spot price trends sheds light on these developments, indicating that both segments are experiencing rough waters.

As of the Golden Week in China, activity in the DRAM spot market has stalledReports suggest that trading volumes continue to decline, and there appears to be no foreseeable rebound in prices before the turn of the yearCertain manufacturers are opting to deplete their inventory aggressively, which has also been a factor in pushing prices downFor context, the average price for mainstream chips, specifically DDR4 1Gx8 2666MT/s, has dipped from $1.934 to $1.929, showcasing a decline of 0.26% over the week

This downward trend is perceived as a troubling signal, especially as holiday seasons typically bring about a surge in sales across various tech sectors.

Meanwhile, the situation is not much better for NAND flash memoryThe market is characterized by sluggish transactions—the Golden Week holiday has resulted in a stagnation in buyer activity, with many suppliers resorting to significant price cuts to stimulate interestDespite these measures, buyers remain unconvinced, further exacerbating conditions of excess supplyThis week, prices for 512Gb TLC wafer have dropped by 0.58%, reaching $2.595. With the global appetite for electronic devices faltering, the performance of these storage units is under intense scrutiny.

This prevalent anxiety in the market can be attributed to a multitude of factors, including supply chain disruptions, rising inflation rates, and the overall decline in global demand

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Analysts have pointed out that these elements have coalesced to form an environment where companies are increasingly vulnerableFor instance, Micron Technology has issued stark warnings regarding its revenue forecasts for the upcoming quarters, marking considerable discrepancies between their expectations and analyst predictionsThis news has awakened investors' fears concerning the viability of the semiconductor market as a whole.

But this downturn isn't only affecting Micron; other key players in the storage chip sector such as SK Hynix and Samsung are grappling with similar challengesThe balance of supply and demand is precariously off-kilterWith the rapid advancements in technologies like artificial intelligence, cloud computing, and 5G, there has emerged a structural shift in storage demand favoring high-performance chipsUnfortunately, conventional storage chips seem to be lagging in meeting this new wave of requirements, igniting concerns about their future viability.

In a cautionary report released by Morgan Stanley on September 15, titled "Winter is Coming," the firm offered a sobering outlook on the semiconductor industry, particularly regarding AI bubbles that may burst in the near future

They conveyed pessimism for the trajectories of SK Hynix and Samsung, primarily driven by weak general DRAM demand and anticipated oversupply of High Bandwidth Memory (HBM) chipsMorgan Stanley adjusted their ratings for SK Hynix to "underweight" and reduced target prices for both SK Hynix and SamsungThe immediate effect was a staggering drop of over 11% in SK Hynix’s stock price within a single trading day, marking its lowest level since February 8.

This revelation sent ripples through the industry, prompting reactions from a semiconductors analyst, Lu Hangzhi, who has echoed these reservations about the storage sectorAnalysts are particularly alarmed about the fourth quarter, which usually witnesses a spike in demand for consumer electronicsHowever, Kingston Technology, a leading memory module manufacturer, is reportedly engaging in aggressive price-cutting strategies to clear out inventory of mid-range products, raising questions about a potential domino effect across the market.

Lu Hangzhi, monitoring the situation closely, expressed that many companies are sitting on inventory equivalent to 11 months' worth of unsold products, emphasizing that the issue extends beyond just mid-range offerings

He has mentioned specific manufacturers such as ADATA, Transcend, and Phison that may be forced to follow suitThere is speculation that recognizing inventory losses could become ingrained in the industry well into the future.

Following his warnings in early September about the non-sustainability of the current strong cycle in the memory industry, Lu reiterated on social media platforms that the only companies appearing to recover profits are those focused on HBM products—suggesting a serious downturn for other computer and consumer electronics memory companies, many of which face disappointing revenues and potential losses.

If traditional DRAM and NAND prices reverse, the normalization of recognizing inventory losses may solidify, implying that non-HBM memory companies may not experience an upward trend anytime soon, perhaps even lacking one for the next twelve months